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VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

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Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#101

Post by gojomo »

[deleted] wrote: post #96
gojomo wrote: post #39

Earlier quoted context omitted.

This is probably a 'qualified dividend' already taxed at same rate as long-term cap gains.

[deleted]

Not sure what you're disputing.

'Qualified dividend' treatment only requires a 60 day holding period.

Also, those with founders shares have almost certainly held (via an 83b election) the shares long enough for long-term capital-gains treatment, as well. If you're saying that yes, the dividend treatment may save them on taxes (or at least be no worse) than other approaches, we agree.

For employees who might have to exercise vested nonqualified options to collect the dividend, other ordinary income taxes may apply... but shares that were early enough could still be in a dividend-is-more-than-all-exercise-and-tax-costs situation, again making the participation a riskless no-brainer... in fact helping them set an earlier start date for future capital-gains calculations.

If they're not in the no-brainer situation, they'd have to decide whether the dividend and early-holding-period-start was worth the cost/risk of converting to actual equity. That's a matter of tax law and risk-affinity... any dilemmas created by having a new range of possible choices aren't a knock against the offer of a dividend.

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#102

Post by pg »

prodigal_erik wrote: post #98
sunnydaynow wrote: post #40

Earlier quoted context omitted.

>It's about entrepreneurs screwing early-employees, Yes, that surprised me a lot! Especially from founders that are somewhat "famous" and are connected to YC. I expected they don't play these tricks. Greed? Anyone knows how their employees reacted to this news? If I would have worked 50+ hours for year(s) and then read this... :(

I would like to think that YC mostly funds ethical people, but that makes AirBnB the worst exception so far. After http://news.ycombinator.com/item?id=2603844 I would expect them to stoop to anything not likely to lead to prison time (and unfortunately the CAN-SPAM act is is pretty useless).

You really should not say this sort of thing when you only have half of both stories. The Airbnbs are not only among the most upstanding people we've funded, but among the most upstanding people I know.

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#103

Post by gabaix »

Why do the founders want to cash out?

It looks to me you can increase your salary to live a good life, while waiting for the big exit. I understood Groupon did this because they thought Groupon was at its peak. Is that the same thing for AirBnB? Am I missing something here?

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#104

Post by prostoalex »

Murkin wrote: post #26
sek wrote: post #12

A founder who believes in his business, will never cash out early. period. He would always get more after an IPO or exit. So why would he? I assume the founders are not stupid, they know their valuation is not justified.

You missed the point, they take the money as dividens. They are not selling their stock for that $20M lump. The only 'foul' thing here, is that their employees (option holders) will probably get nothing.

I don't pretend to know the ins and outs of this, but the dividend is to common stock. What if the next step after closing the deal would be founders telling employees to exercise as much as possible, and then announce the dividend?

Granted, most of that money would probably have gone towards AMT, but let's not vilify AirBnB before we hear their end of the story.

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#105

Post by prostoalex »

gojomo wrote: post #101
[deleted] wrote: post #96

Earlier quoted context omitted.

[deleted]

Not sure what you're disputing. 'Qualified dividend' treatment only requires a 60 day holding period. Also, those with founders shares have almost certainly held (via an 83b election) the shares long enough for long-term capital-gains treatment, as well. If you're saying that yes, the dividend treatment may save them on taxes (or at least be no worse) than other approaches, we agree. For employees who might have to e…

You're right, I was confused.

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#106

Post by philwelch »

jroseattle wrote: post #74
keeptrying wrote: post #61

Earlier quoted context omitted.

Your "little guy" has been earning a salary for the last 3 years in the startup - in fact he makes more money than the founders. I still think its okay to compensate the founder for getting the app to this point.

Try using that as your sales pitch for hiring the "little guy" in this market and let us know how far you get.

Are prospective startup employees really motivated by stock options? There's no shortage of HN posts that actually work out the math and conclude that you won't get rich from employee stock unless the startup succeeds on the scale of Google, Amazon, or Microsoft.

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#107

Post by SkyMarshal »

steve8918 wrote: post #53
grellas wrote: post #44

A few thoughts: 1. It is bad form for this sort of thing to be aired publicly. It may give us a voyeuristic fascination on something that is depicted as an internal intrigue within a prominent up-and-coming startup but this is fundamentally company confidential information that is not capable of being aired publicly without significant distortion. Who can answer the implied charges of impropriety? Those most directly…

I completely and vehemently disagree with your response. You are acting as if the dot com bust never even happened!! I have no clue how old you are, but if you are over the age of 35, maybe you'll remember that the dotcom "boom" was merely a two-fisted cash grab from investors into the pockets of the founders and VCs. I certainly hope that as in industry, we don't make the same mistake twice in 10 years, lest it will…

Fyi, George has been around a while:

http://news.ycombinator.com/user?id=grellas

http://grellas.com/

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#108

Post by ojbyrne »

keeptrying wrote: post #61
vladd wrote: post #47

Earlier quoted context omitted.

The 3 points you make forget the little guy: that early employee, whose employee number has 1 digit, who trusted the founders when he accepted the option grant and put 60 hours of work or more each week in the hope of not being screwed when the founders negotiate confidentially with the investors on how the company will move forward. There's no SEC for privately-held companies, there is basically no oversight and the…

Your "little guy" has been earning a salary for the last 3 years in the startup - in fact he makes more money than the founders. I still think its okay to compensate the founder for getting the app to this point.

Perhaps more than the founders, but often significantly less than they can earn elsewhere. Foregone income and all that...

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#109

Post by SoftwareMaven »

gabaix wrote: post #103

Why do the founders want to cash out? It looks to me you can increase your salary to live a good life, while waiting for the big exit. I understood Groupon did this because they thought Groupon was at its peak. Is that the same thing for AirBnB? Am I missing something here?

The founders aren't getting diluted in the deal, since they are being distributed as dividends. This will give them the opportunity to run past third to slide home instead of taking the standing triple, since they won't be left with nothing if the umpire calls them out.

Re: VC Decries Airbnb’s Recent Funding for Founder Control and Cashout

#110

Post by staunch »

veyron wrote: post #95
staunch wrote: post #43

Earlier quoted context omitted.

In Silicon Valley all the best people aren't in it just for the money. Can't say that about Wall Street.

As a person in Wall Street who isn't in it just for the money, I resent your remark.

There are probably a few exceptions. Do you honestly disagree with the sentiment?
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